Yield Curves and Benchmarks
While the municipal securities market is composed of unique bond issues, each with its own specific structural characteristics, ratings and yields, market indicators provide sector-specific or broad market information about the general level of municipal interest rates. These indicators include indices, benchmarks and yield curves.
Municipal securities issuers and investors may use these indicators to assist in the evaluation of a unique bond’s yield or its performance relative to a particular sector or the market as a whole. Indices, yield curves and benchmarks often are used by underwriters as a factor when determining the yield levels at which a new issue of municipal securities will be offered to investors.
The following educational publications provide more information on yield curves, indices and benchmarks.
In 2014, the Financial Stability Oversight Council (FSOC) recommended that U.S. regulators identify an alternative benchmark rate to the London Interbank Offered Rate (LIBOR), which represents the average rate at which a leading bank can obtain unsecured funding in the London interbank market. That year, the U.S. Federal Reserve created the Alternative Reference Rates Committee (ARRC) to evaluate potential alternatives for the U.S dollar LIBOR benchmark. The ARRC has identified the Secured Overnight Financing Rate (SOFR) as the rate that represents best practice for use in certain new U.S. dollar derivatives and other financial contracts.
The ARRC provides resources and recommendations to facilitate an orderly transition from LIBOR, including principles for fallback contract language.Learn more about the ARRC
The SOFR rate is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities. It is published daily by the Federal Reserve Bank of New York. Access information and daily rate data for SOFR
For more information about LIBOR see LIBOR and the Municipal Market
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